Private Letter Ruling Law and Legal Definition

Private letter ruling is an informational statement of the Internal
Revenue Service's (I.R.S.'s) interpretation of statute or administrative
rules and their application to a particular set of facts or circumstances.
A private letter ruling typically addresses unusual or complex questions
pertaining to a particular taxpayer. The purpose of the letter ruling,
usually sought by the taxpayer in advance of a contemplated transaction,
is to advise the taxpayer regarding the tax treatment he can expect from
the I.R.S. in the circumstances specified by the ruling. The procedure
for requesting a private letter ruling is updated annually. It is always
the first revenue procedure in the first Internal Revenue Bulletin of the
year.

State laws, which vary by state, also may allow for private letter rulings
to be issued by the state's tax authority. The procedures vary, but the
underlying purpose is the same as the federal private letter ruling.